Obama said to seek US$1.2-trillion in revenues in new fiscal cliff offer

Fiscal cliff offer from Obama seeks US$1.2T in revenues: source

President Barack Obama made a new budget offer that would raise taxes by US$1.2-trillion and increase tax rates for households earning more than US$400,000 a year, up from US$250,000, said a person familiar with the talks.

Obama’s plan would cut US$1.22-trillion in federal spending, including interest savings, said the person, who spoke on condition of anonymity. It would change the inflation measure used to calculate Social Security benefit increases. In his offer, Obama would increase the U.S. debt limit for two years.

Failure to prevent the U.S. fiscal cliff of automatic tax hikes and spending cuts would affect Canadian growth and create uncertainty, Canadian Finance Minister Jim Flaherty said on Friday, adding that he had just spoken to U.S. Treasury Secretary Tim Geithner about the issue.
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Obama and House Speaker John Boehner are negotiating to avert more than US$600-billion in tax increases and spending cuts set to start in January. Obama presented the offer to Boehner today, the person said.

Obama and Boehner met for 45 minutes today at the White House for the third time in nine days as they try to prevent the so-called fiscal cliff.

Boehner spokesman Brendan Buck, in an e-mailed statement tonight, called the offer “a step in the right direction” though he said it “cannot be considered balanced.” He said the offer included US$1.3-trillion in revenue and US$930-billion in spending cuts.

That calculation doesn’t count US$290-billion in lower interest payments as part of the spending cut. Interest savings are a byproduct of tax and spending decisions. Buck said the speaker hopes to continue negotiations.

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Boehner and Majority Leader Eric Cantor will give House Republicans an update on the negotiations at their weekly conference meeting tomorrow, according to a leadership aide who requested anonymity to talk about the leaders’ plans.

Obama and Boehner are still far apart on where to draw the line on tax rates, how to address the debt limit and whether stimulus spending should be included in a budget deal.

Obama’s offer includes several details that hadn’t previously been publicly under consideration. His proposal would end three recurring debates that occur in Congress over expiring provisions.

Obama would permanently extend an annual “patch” that prevents expansion of the reach of the alternative minimum tax. He would end a scheduled payment cut to doctors under Medicare. Also, he would permanently extend dozens of tax breaks that routinely expire, such as the research and development tax credit and the ability to deduct state and local sales taxes.

Health Programs

His plan would achieve US$400-billion in savings from health programs, US$200-billion from other so-called mandatory spending programs and another US$200-billion from other programs, half in defense.

About US$130-billion of the spending savings would come from switching the way that annual inflation increases for Social Security benefits are calculated. Obama’s offer would include protections for the most vulnerable recipients, the person said.

While Senate Majority Leader Harry Reid, a Nevada Democrat, has declared Social Security off the table in a year-end budget deal, the CPI revision has been a centerpiece of most major bipartisan efforts to trim the U.S. debt.